I run a multivariate regression to control for other factors that might influence choice of
transactional form. The dependent variable is TENDER, set to 1 if the controller executed the
freeze-out through a tender offer, and 0 if the controller executed the freeze-out through a
statutory merger. To test Hypothesis H3, I include the continuous variable CONTROL, defined
as the controller’s pre-deal stake, which is inversely correlated with the fraction of minority
shares that would be needed in a tender offer freeze-out. Hypothesis H3 predicts that the
coefficient for CONTROL should be statistically significant and positive.
To test Hypothesis H4, I model law firm experience in three ways. In one specification I
include LOG(EXPERIENCE), where EXPERIENCE is defined as in Part 4.1. In a second
specification I include a dummy variable EXPERIENCED?, set to 1 if the controller’s outside
counsel is one of the fifteen firms with the most M&A experience. In a third specification I
include the scalar variable EXPERIENCED?*CONTROL, where CONTROL is the controller’s
pre-deal stake, to test a potential interaction between Hypotheses H3 and H4. The prediction is
that the coefficients for all of these variables will be positive and statistically significant.
In order to provide a further test of Hypothesis H4, I include a continuous variable LTREND,
calculated as the natural log of the number of days between the Siliconix decision and the deal
announcement date. If law firms learned over time about the benefits of the tender offer
mechanism, LTREND should be statistically significant and positive as well.
to a freeze-out, they are excluded from my analysis for reasons described in note 27 supra. A second potential determinant in choice of transactional form is Rule 14d-10, the all holders/best price rule, which may be triggered by side agreements made in conjunction with a tender offer. There is currently a split among the circuit courts of appeal in the application of this Rule to side agreements. Compare Epstein v. MCA, Inc., 50 F.3d 644 (9th Cir. 1995) (focusing on the role of the transaction in the underlying tender offer) with Kahn v. Va. Ret. Sys., 13 F.3d 110 (4th Cir. 1993) (focusing on whether the transaction was made “during or pursuant” to a tender offer). However, with the benefit of ten years of 14d-10 case law, careful drafting of side agreements can minimize if not eliminate 14d-10 risk. (Khmelnitskiy 2004)